Strange days indeed

As the industry awaits the outcome of this year’s ACAR, Department of Health and Ageing figures show a startling drop in the number of new beds being built.

Above: James Underwood.

By Stephen Easton

New building has stalled in aged care, against a background of declining occupancy levels and the flow-on effects of a departmental policy change to restrict the number of extra service places approved in the last two years.

The government’s most recent Report on the Operation of the Aged Care Act reveals that only 2,553 new nursing home beds were built in the last financial year – almost half the average number for the previous six years, and well below last year’s figure of 4,557.

According to aged care consultant James Underwood, the “extraordinary reduction” is largely due to the Department of Health and Ageing (DoHA) allocating no new extra services places in 19 regions, in the 2009 and 2010 Aged Care Approvals Rounds (ACAR).

These 19 regions, of 671 used by DoHA for aged care planning, covered populous metropolitan areas that accounted for more than half of Australia’s population of older people, according to Mr Underwood.

“It was a completely inappropriate thing for the Department to do,” he said. 

“[…] As a result of this, all the places where you actually want to build a nursing home, or where there was a substantial need to build a nursing home, were said to be oversupplied [with extra services]. 

“In 2010, we thought they would fix it and give out more extra service approvals but again, they knocked them back.”

A proportion of extra service places had become a standard inclusion in most new facilities, he said, as they allowed providers to receive accommodation bonds from high care residents.

“In 2008 there were a lot of new approvals for extra services given out,” Mr Underwood said. “The industry had gotten the idea that [in most cases] the only way to [build viable new facilities] was to get partial extra services approval.”

“Extra services, when it began 21 years ago, was expected to be a small scale thing for [wealthy people].

“…The sector never embraced that idea very strongly but [the current situation] identifies that we need to get bonds in. Providers have come to use the extra services ‘bonds in high care’ rule for a purpose it wasn’t originally intended.”

The consultant, whose firm advised on 14 per cent of all residential care approvals last year, said the freeze placed on extra service approvals in 2009 and 2010 had led to a lot of building projects either being put on hold, or cancelled altogether.

Significantly more extra service approvals are likely in this year’s ACAR, after DoHA reversed the unpopular policy and invited providers to apply for them, but Mr Underwood expects the knock-on effects of the two-year freeze to continue.

“I think once you turn off the tap, turning the tap back on again is going to take a while. … I expect that [this year’s figures for new beds] will be fairly poor too. The government’s failure to give out extra service places has choked the growth of new places.”

Aged Care Association Australia (ACAA) CEO, Rod Young, said that in some respects, the massive drop in new beds was a correction by the market in response to declining occupancy levels.

The department’s invitation was “very welcome”, Mr Young added, and would provide some impetus for a return to capacity growth.

“Providers are not willing to take the risk to invest in additional capital if they cant get a reasonable occupancy level,” Mr Young said.

Occupancy for all Australian residential aged care facilities has been dropping steadily for a number of years, from 96% in 2003 to 92.4% in 2010 – but in some areas, waiting lists still exist.

The apparent difficulty in projecting demand for residential care was due to unpredictable domestic migration and lifestyle patterns, Mr Young said, as well as increasing options to age in place in retirement living accommodation.

At the same time as occupancy has declined, the total number of beds on offer through the ACAR process has consistently been far in excess of the number sought by aged care providers.

“In this ACAR the government is giving out 10,493 beds and last year we only built 2,553,” Mr Underwood said. “Somebody is pulling someone’s leg; it’s just not realistic to think we’ll turn around from 2,500 to building 10,500.”

Despite the growing number of ‘unbuilt beds’, bed licenses were not going to the places where people want or need them, the experienced ACAR consultant added.

“In some areas, people are not taking up the bed licenses but in places where there is a strong need, the feds aren’t giving out any beds.

“In South-East Sydney, providers sought to build 573 beds last year but the government only made 108 available. In northern Sydney, no places were made available in the last ACAR at all, but applications were made for 218 beds.”

Likewise, he said, the eastern side of Melbourne was allocated 230 new licenses in the last ACAR – while applications were made for 1750 places.

Tags: acaa, acar, aged-care-approvals-round-acar, bed-licences, beds, department-of-health-and-ageing, doha, residential-aged-care,

1 thought on “Strange days indeed

  1. Sounds like a storm in a teacup. The Productivity Commission has recommended removing the low care-high care distinction enabling access to bonds across all beds and discontinuing the then unncessary extra service regulation – within two years. Further, they recommended removing supply restrictions in about five years. Bring on the time when the market is allowed to respond to supply in response to demand needs unfettered by restrictive allocations!

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